May 08, 2013, 03.37 PM | Source: CNBC-TV18
Ajay Srivastava, CEO, Dimensions Consulting feels that Karnataka election results, which will be announced today will give some buoyancy to market.
Ajay Srivastava (more)
CEO, Dimensions Consulting | Capital Expertise: Equity - Fundamental
Karnataka Assembly elections recorded the second highest voter turnout in 35 years with a polling percentage of 71.29 in the May 5 voting.
He expects shares to give good returns in May and sees the Nifty touching the psychological 6100 mark anytime.
According to him, the current rally has the potential for another 150-200 points upside and investors should be positioned in large cap stocks where Foreign Institutional Investors (FIIs) are present and profit expansion is good.
However, given this euphoria, he cautions investors of getting trapped by investing in wrong businesses. "There are lots of stories which are ramping up purely based on domestic demand situations. Those companies are not going to benefit the way the market is perceiving it," he said in an interview to CNBC-TV18.
FMCG, pharma and OMCs are the sectors that Srivastava is bullish on.
He is not so upbeat on the rate-sensitive sectors like real estate and two-wheelers and is short on them. Investors should stay away from IT stocks now, he added.
Below is the edited transcript of Srivastava’s interview to CNBC-TV18.
Q: We have had a pretty strong run on the market bolstered of course with the kind of money we are seeing. What is the sense you are getting of how May may finally turn up?
A: We should not have gone away and we are all going away in May, that’s the bottom-line. May is looking very good and the results coming out of Karnataka elections should give a little more buoyancy to the market. However, there is a clear word of caution here that lot of stories that we saw ramping up yesterday are purely based on domestic demand situations. Those companies are not going to benefit the way the market is perceiving it. So, among this euphoria, there is also lot of froth building up and people who have joined the wagon now need to be extra careful because I don't think they are in for an easy ride for next 10-20 percent.
It is going to be a rough ride for them. They are buying into some of the wrong companies and so, one has to be careful where he/she is putting his money when the rally is at 6100.
Q: How much more would you give it because as you pointed out we are knocking on the doors of the highs we have seen this year?
A: We have predicted that the rally will take the previous highs out. It has happened much sooner than what we thought. We were looking at it to be closer to Diwali. It happened much before that. So 6100 is there for the taking right now.
The question is, which of the stocks will crack up first when the downturn starts? One has to be careful. This is a market wherein when one invests; he’s got to be careful as to where one is positioned when the rally stops.
The rally has got another 100-120 points leg to move on and if Supreme Court is little more benign today, one could see a lot more leg up to the rally. So, we have 120 points for the taking today or tomorrow if the Supreme Court is little more benign but one’s got to be careful as to where he is positioned.
One should be positioned in the mainline stock where the Foreign Institutional Investors (FIIs) are, where people are going to benefit and profit expansion is good. One has seen flat result sales and very good profits. So, this is one rally fueled by profit EPS expansion more than volume expansion. However, this is not broad based. All the companies are not getting the same benefit. So, the rally is 120 points but the selection of stocks is going to be much smaller.
Q: If most of the easy money has already been made, where do you put fresh funds now in terms of individual stocks?
A: Individual stocks-wise, we have seen the consumer story come back to the fore again. The profit expansion has been good and people are expecting some buys. We saw good action in Emami and Hindustan Unilever ( HUL ) has been a star. So, the consumer story has been good, the liquor companies have performed exceedingly well and pharma has done reasonably well. I think the block of pharma and consumer stories constitute a little more safer block.
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